Corn and Wheat:
March corn closed 4 1/2 cents higher on volume of 330,112 contracts. Open interest declined by 2861 contracts. During January 24 and January 25, prices advanced total of 14 1/2 cents and open interest declined by 8,018 contracts. Since January 13 (the day after the USDA crop report) through January 25, corn advanced $.23 or 3.76%. Open interest during this period increased by 10,777 contracts
March wheat advanced by 36 1/4 cents from January 13 through January 25, or 5.99%. Open interest in this period increased by 37,400 contracts. Although the supply demand situation is far tighter in corn than in wheat, wheat has been the star performer since January 13, one day after the USDA released its crop report. On January 24, the spread in wheat and corn reversed and wheat sold at a premium to corn for the first time since January 13. As of January 25, the spread is selling for nearly the same price as it was on December 30. The interesting aspect to all of this, is that the supply demand situation in wheat is far more burdensome than in corn. Also, the amount of speculative shorts in wheat is near a record with managed money and small speculators having a total of 62,544 contracts net short position. On the other hand, corn has a total net long position of 198,928 contracts for managed money and small speculators. It is apparent that the large number of speculative shorts have not closed out their positions in wheat despite that wheat has had a larger percentage move than corn from the January 13 through January 25. I will be publishing a strategy on how to play these two markets in the upcoming weekend wrap.
March soybeans closed 6 1/2 cents lower on volume of 142,156 contracts. Open interest declined by 890 contracts. Nothing new to report here, market still looks weak.
March sugar closed lower by 38 points on volume of 106,591 contracts. Open interest increased by 2745 contracts. The market seems to be consolidating in the 24.00 to 25.00 range. In the weekend wrap, I will do an analysis of open interest from the beginning of the move.
March crude oil closed $.45 higher on volume of 597,604 contracts. Open interest increased by 11,985 contracts. The market is consolidating in a range of 101.00 and 97.50. Stand aside.
March copper closed higher by 2.20 cents on volume of 63,971 contracts. Open interest declined by 887 contracts. Nothing new to report. If long from lower levels, have stops placed based upon money management and your risk tolerance. The market is far too overbought at this juncture, to enter any new longs.
February gold closed higher by $35.60 on heavy volume of 301,867 contracts. Open interest increased by 7965 contracts. Although the volume was quite heavy, the open interest increase was fairly minor by comparison. The impetus for the move higher was a declining dollar index and the announcement by the Fed that interest rates would stay at low levels through the end of 2014. The announcement sent numerous markets higher including precious metals and equities. The real test for gold will be how it trades on declines. At this point, my opinion is to stand aside. The dollar index decline can be reversed in the event that the euro resumes its decline, which could happen at any time. As of January 25, March gold closed approximately $34.00 over its 50 day moving average of 1666.61 indicating it is somewhat overbought.
March silver closed higher by $.97 on heavier than usual volume of 53,611 contracts. Open interest declined by 509 contracts. This is certainly a disappointing performance considering that the volume was higher than usual, yet open interest did not respond positively. March silver’s 50 day moving average is 30.92 and silver settled at 33.12 indicating that silver is considerably overbought. The problem with its overbought condition is that open interest action indicates that the market is not in strong hands. In the event of a broad market decline in the outside markets, silver could take a large hit. Silver closed above my key pivot point of 32.17 and therefore the market can certainly work its way higher. Until silver corrects, stand aside.
The March euro closed 62 points higher on volume of 366,171 contracts. Open interest declined by 5525 contracts. Although in my opinion, the euro is a bear market, it can nonetheless work its way higher and blowout the heavy short position held by speculators. Stand aside.
S&P 500 E Mini:
The Fed announcement that it would keep interest rates low through the end of 2014 sent the market skyward. The S&P 500 E mini, closed higher by 8.75 points on volume of 1,976,185 contracts. Open interest increased by a healthy 39,826 contracts. The market seems to want to go higher and the announcement by the Federal Reserve just added fuel to the fire. My opinion on this market has not changed and is by any standard is massively overbought. Long put protection should be in place.
10 Year Treasury Notes:
March treasury notes closed 21 1/2 points higher on massive volume of 1,592,861 contracts. Open interest increased by a fairly minor 14,683 contracts. The Fed announcement was the impetus for the move higher in notes and the market never penetrated two of my key pivot points on the down side. The market is moving up near its high of 131-235, which is the high going back well over a year. The three-year high is 132-07. It appears that the Federal Reserve is going to do anything it can to keep interest rates at the lowest level possible. As a result, the market can continue to move higher.